July 5 (Bloomberg) -- Cerberus Capital Management LP, the
largest shareholder of Seibu Holdings Inc., will meet with
executives of the hotel and rail operator today for the first
time since the fund lost a fight for board seats, according to
two people familiar with the situation.

Cerberus and Seibu will discuss corporate governance and
the possibility of an initial public offering for Seibu,
according to the two people, who asked not to be named because
they aren’t authorized to discuss it publicly.

The New York-based fund, which failed in its bid to have
eight directors elected to Seibu’s board on June 25, aims to
improve profitability at Japan’s fourth-largest hotel operator
before selling shares to the public. Seibu President Takashi
Goto has said he won’t offer “any concessions” to Cerberus.

“It’s a good sign,” said Nicholas Benes, a representative
director of The Board Director Training Institute of Japan. “It
could be progress. Dialogue and discussion is all about being
open-minded.”

Norinchukin Bank and the Development Bank of Japan Inc.,
Seibu’s largest lender, are also attending the meeting,
according to the people familiar with the situation.

Spokesmen for Seibu, which is unlisted, and Cerberus
declined to comment.

Quayle Loses Vote

Cerberus, with a 35.5 percent stake in Seibu, recommended
executives including former U.S. Vice President Dan Quayle and
former U.S. Treasury Secretary John Snow to the board. The
fund’s representatives won 39.8 percent of the votes cast, while
the hotel operator’s nominees all won at least 59 percent of the
vote, according to a statement from Seibu the day after the
shareholder meeting.

Yoshiaki Tsutsumi, who holds 36 percent of second-largest
Seibu shareholder NW Corp., backed the hotel and rail operator.
Tsutsumi amassed a $16 billion personal fortune while at the
helm of Seibu and was named the world’s richest man by Forbes
magazine in 1990.

Seibu has said it’s already “financially prepared” for an
initial public offering, while Cerberus has said it’s willing to
wait as long as three years and wants the company to improve
earnings.

The Tokorozawa, Japan-based hotel and rail company had net
income of 15.6 billion yen ($156 million) in the year ended
March, compared with 8.4 billion yen a year earlier, with sales
of 459 billion yen, according to the company.

$1.2 Billion Investment

Stephen A. Feinberg’s fund spent about 120 billion yen
acquiring its stake in Seibu, which was delisted in 2004 for
breaking exchange rules by misstating stakes. The investment
compares with the $7.4 billion it spent to buy an 80.1 percent
stake in Chrysler LLC in 2007.

The fight for control at Seibu shows the challenge overseas
private-equity funds face in Japan, where attempts by foreign
investors to gain board representation have mostly been beaten
back.

T. Boone Pickens gave up his attempt to gain a board seat
in the 1990s at Koito Manufacturing Co., while Christopher
Cooper-Hohn’s Children’s Investment Fund Management UK LLP
failed in 2008, as did Warren Lichtenstein’s Steel Partners in
2010 with separate Japanese companies.

Hawaii Hotels

Prince Hotels Inc., owned by Seibu, runs a chain of 50
hotels in Japan and around the world, including the Hawaii
Prince Hotel Waikiki. Seibu got 155 billion yen, about a third
of its revenue of 459 billion yen, from its hotel and leisure
businesses in the year ended March, according to the company.

Cerberus published a list of nine topics earlier this month
that it wanted to raise at the shareholders meeting, including
failures to meet profit targets, lack of comparisons of results
with other companies in the industry, and lack of disclosure on
its operations in Hawaii.

Cerberus, which raised its stake in Seibu in May, led a
2006 bailout of the seventh-largest railway operator in the
Tokyo area with Nikko Principal Investments Japan Ltd.

The hedge fund, which announced a tender offer in March to
boost its stake in Seibu, ended up buying 10 million shares,
3.04 percent of the amount outstanding.